Electric vehicles (EVs) are in rough terrain. While U.S. EV sales rose 7% last year to 1.3 million in the U.S., the Trump administration's not-so-friendly stance toward electric vehicles has spooked some investors and ignited concerns that growth among EV makers could be stifled.
So what's an investor in EV stocks to do? As someone who believes in the long-term potential of this market, I think the current difficulties some EV makers are facing could be temporary. Let's look closely at start-up Lucid (LCID 5.20%) and established leader Tesla (TSLA +2.96%) to see which is the better buy.
Image source: Lucid.
Tesla is slowing down but it's not finished yet
Tesla is coming off of an unimpressive quarter in which automotive sales fell 8% to $19.8 billion and both revenue and earnings missed analysts' consensus estimates. Lower average selling prices for many of its models were the main culprit for the drop, but it left some investors wondering if Tesla's best days are behind it.
Adding to Tesla's difficulties, its vehicle deliveries were about 1.8 million for the quarter, representing the company's first annual decline. Tesla's management said the "vehicle business will return to growth in 2025" but it's still uncertain how that will happen.
NASDAQ: TSLA
Key Data Points
It's not all bad news for Tesla. The company still has 18% of the global EV market, and a long-rumored cheaper Tesla vehicle could spur new sales. Tesla CEO Elon Musk has said affordability continues to be an issue for potential buyers, and a cheaper model could debut as soon as this year.
Musk said on the fourth-quarter earnings call that autonomous vehicle technology and robotics will be key to Tesla's future growth. While his view of Tesla eventually becoming the most valuable company in the world may be overly rosy, he may not be wrong about robotics and autonomous vehicles.
The robotics industry will be worth an estimated $73 billion by 2029, and estimates are for the autonomous vehicle market to reach $2.3 trillion by 2030. Tesla has already made progress in both segments, with its full self-driving (supervised), a proposed robotaxi service, and its Optimus AI robot.
The point here is that any eulogy for Tesla is a bit premature. Even as it loses EV ground, the automaker continues to move into new areas of growth.
A promising EV maker with too many costs
Lucid has been on investors' radars since its splashy public debut in 2021. After an initial share-price surge, its stock has plunged 66%.The good news is that Lucid makes great EVs. The bad news is that it makes them at a great expense.
The young automaker currently sells multiple versions of its Air sedan and recently started producing the Gravity SUV. All of Lucid's vehicles target a high-end clientele, with the cheapest Air starting at about $70,000. The high prices keep Lucid's vehicles out of reach for most buyers, and the luxurious vehicles are expensive to make.
NASDAQ: LCID
Key Data Points
Lucid's net loss in 2024 was $2.7 billion, only slightly improved from a loss of $2.8 billion in the previous year. While all new EV start-ups lose money, Lucid's move toward more expensive vehicles (the Gravity SUV starts at about $80,000) may be a mistake.
To be sure, Lucid will be able to save money and potentially increase production efficiencies by reusing some components of its Air sedan in the Gravity. But the fact remains that Lucid is moving even further up the pricing scale as many EV makers are releasing cheaper vehicles to attract more customers. Fellow EV start-up Rivian, for example, will launch a smaller crossover SUV for $45,000 early next year.
Lucid also searching for its next iteration as the company's CEO, Peter Rawlinson, recently announced he's stepping down from the position. Marc Winterhoff, Lucid's COO, was appointed as the interim CEO. That could be a step in the right direction for Lucid, but it's too early too tell. For now, the company's significant losses are still its largest hurdle.
Tesla for the win
I think Lucid has potential, but the company is losing too much money right now. A difficult EV environment and rising costs compound its problems. Tesla isn't without its problems, but the company is still a major player in the global EV market and has room to invigorate its current lineup through redesigns and cheaper models.
Given its forward price-to-earnings multiple of 119, there's no denying that Tesla's stock is expensive. But at least the company is profitable, produces millions of vehicles, and has a significant portion of the EV market. Lucid can't claim the same. That said, if you're starting a position in Tesla, it may be best to start small and add to it if the stock takes a dip.
